August 9 - Is HARP 3.0 on the Horizon?
Is HARP 3.0 On The Horizon?
Following the downturn of the housing industry in 2007-2008, millions of homeowners found they owed more on their home loan than the home itself was worth. So, is that a big deal? If you’re trying to sell the home it’s a very big deal. When borrowers begin to fall behind on their mortgage payments at some point many feel the only way out is to sell the property but if the local real estate market is in the middle of a slump they won’t be able to sell the home for enough cash to pay off the mortgage. They’re upside down.
The Federal Reserve made multiple attempts to rescue the market by lowering rates. Lower rates would mean borrowers could refinance into a mortgage with lower payments and avoid foreclosure. But the catch-22 in all that was there needed to be equity in the property to be eligible for a refinance. Upside down borrowers were stuck. They couldn’t refinance and they couldn’t sell. Enter HARP, the Home Affordable Refinance Program introduced in 2009. The initial HARP allowed homeowners to refinance their conventional mortgage even if the new loan represented 125% of the home’s current market value. But that still kept millions on the sidelines.
HARP 2.0 was introduced in 2012 and eliminated the 125% requirement and eliminated any loan to value issues. It didn’t matter what the property was worth, borrowers could still refinance to a lower rate. HARP 2.0 guidelines are:
- The loan must be owned by Fannie Mae or Freddie Mac
- The loan must have funded before June 1, 2009
- No mortgage payments made more than 30 days past the due date within the past six months and no more than one such payment within the past 12
There are additional guidelines but these are the main ones. HARP 2.0 was a success and still is but there are still some changes that could be made to help millions more take advantage of lower rates. There is talk of HARP 3.0 to address these changes.
If HARP 3.0 is in fact implemented, we can expect most of the HARP 2.0 requirements to remain yet eliminates the requirement of when the existing loan could be funded, before June 1, 2009. If HARP 3.0 does appear and the June 1 deadline removed, it can help millions take advantage of lower rates and make their homes more affordable.
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